EU Taxonomy

The EU Taxonomy creates a classification system with criteria to determine whether an economic activity is environmentally sustainable. To date, the Taxonomy covers over 100 prioritised sectors, including the manufacture of cement (NACE 23.5.1).

Our products play an important role in supporting Europe to achieve carbon neutrality by 2050. The high resource efficiency gives them low environmental impact in all phases of their life cycle, from processing of raw materials to the disposal of waste, thus making it the right building material to help meet the demands for circularity and GHG emissions reduction.

However, the manufacture of concrete products for construction purposes (NACE 23.6.1) which is where our products are classified is not yet included in the Taxonomy as a separate economic activity. The Taxonomy Technical Report (June 2019, p191192) states that concrete products are not included because the cement content and total GHG emissions can vary significantly based on the specifications of the application that the concrete will be used for. For this reason, the manufacture of concrete (NACE C.23.6) and concrete products are not covered by the Taxonomy. Hence, H+H’s activities are not eligible. The proportion of H+H's revenue derived from products or services eligible is 0. All of H+H's activities are related to manufacture and sales to AAC and CSU. Consequently, the proportion of capital expenditures and operating expenditures is 0 as well.

Taxonomy eligibility reflections

Why don’t you classify H+H’s economic activities as “External wall systems”? There are no interpretations that define exactly what are the criteria for such. It is true that a share of our sales is used in external walls. But H+H is neither selling the full wall system, nor produce all the components needed.

But H+H’s products are used for walls with superior thermal insulation? Definitely, and it also why we have investigated the subject in more details. In theory, all our products can be used to achieve such thermal performance, but this is not how modern housing is built. Using cavity wall systems, insulation products, and façade systems are supplementing the strength and insulation that H+H’s products are providing.

Is it an aspiration to be a part of the taxonomy? Our products play an important role for the overall political aspirations. So, we see this as the start of a journey. Fundamentally, we think there needs to be a cost/benefit side of the story, as the current wall measure is solely focusing on the performance–not the associated carbon emissions and resource use. As we have an industry leading position on carbon reduction commitments, the current measure would not display the full story. But we acknowledge that it is early days working with the classification system. In our opinion sustainability should be measured on a building level and over its full life cycle.

Does that mean you are able to report, should it be specified, that your products are eligible under such parameters? It would display a lack of understanding of the supply chain to do so. As a manufacturer, a significant share of the sale is through builders merchants. Therefore, we do not know the end customer and how the products are applied–the products are even available in DIY chains; hence it is not possible to trace the actual use.

So, overall allocations can be provided based on the share of the sale to housebuilders, but it would not be a precise reflection as there is not a direct link between the call offs and the housebuilders’ range of houses. An example is that when a site is completed, unused surplus products are moved onto the next project to avoid waste. Will there for H+H be a 1-to-1 relation between proportion of revenue and OPEX/CAPEX? This is not necessarily the case. It will depend on the parameters and the actual circumstances. For the operating expenditures some degree of correlation can be foreseen.

Investments are expected to be a leading indicator if the right measures apply. E.g. the anticipated investments to reduce carbon emissions should lead to a more sustainable product portfolio. Hence, an asymmetric profile should be expected.

So, what are H+H’s overall conclusions on the taxonomy? As mentioned, it is early days, and it needs to evolve. There is a clever rationale for the overall objective, but realities do bring in a lot of practical complications. To ensure the regime will support the overall objective–and avoid greenwashing–it has to be built on some tangible measures.